Certified Government Financial Manager (CGFM) Practice Exam 2026 - Free CGFM Practice Questions and Study Guide

Question: 1 / 875

How is the legal debt limit for a state established?

In ordinances and state constitution

In local charters and ordinances

In ordinances and state statutes

In state constitution or state statutes

The legal debt limit for a state is established primarily in the state constitution or state statutes. The state constitution typically outlines fundamental rules and principles regarding how much debt a state can incur, ensuring that any limits are embedded within the highest legal framework of the state. Additionally, state statutes frequently provide more detailed regulations that may define specific conditions under which the state can borrow funds, including limits on the amount and the purpose of the debt.

This dual mechanism ensures transparency and accountability in the state's borrowing practices, reflecting both the fundamental legal principles of the state and more nuanced administrative details. Such frameworks help prevent excessive borrowing and promote fiscal responsibility.

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